Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Nissan posted better than expected results for the second consecutive quarter but once again it was the Finance business doing the heavy lifting and as we suspected cost cuts from 1Q did not fully carry over into 2Q. While Nissan is beating consensus we have concerns about the quality of earnings.

Nissan posted better than expected results for the second consecutive quarter but once again it was the Finance business doing the heavy lifting and as we suspected cost cuts from 1Q did not fully carry over into 2Q. While Nissan is beating consensus we have concerns about the quality of earnings.

Nissan– Dragged Along by the Finance Business

Nissan reported 1QFY22 results on Wednesday generating revenue of ¥2,008bn (-21.1% QoQ, +71% YoY) and OP of ¥75.7bn (for an OPM of 3.8% compared to OPM of -13.5% and -0.9% respectively in 1QFY21 and 4QFY21). The improvement of Nissan’s profitability compared to its previous quarter was mainly due decreases in SG&amp;A expenses which were 12.8% of revenue compared to 15.1% and 21.9% respectively in 1QFY21 and 4QFY21. The reported revenue was 6.5% higher than consensus estimates while OP beat by ¥130bn, thanks in large part to the finance business.<table class="table table-striped"><tbody>
<tr>
<td style="width: 42.76%;">In ¥bn</td>
<td style="width: 19.7%;">Revenue </td>
<td style="width: 17.84%;">OP</td>
<td style="width: 19.7%;">OPM</td>
</tr>
<tr>
<td style="width: 42.76%;">Actual Results - 1QFY22</td>
<td style="width: 19.7%;">2,008</td>
<td style="width: 17.84%;">              76</td>
<td style="width: 19.7%;">3.8%</td>
</tr>
<tr>
<td style="width: 42.76%;">Consensus - 1QFY22</td>
<td style="width: 19.7%;">1,886</td>
<td style="width: 17.84%;">-            55</td>
<td style="width: 19.7%;">-2.9%</td>
</tr>
<tr>
<td style="width: 42.76%;">Surprise</td>
<td style="width: 19.7%;">6.5%</td>
<td style="width: 17.84%;">NM</td>
<td style="width: 19.7%;">6.7% points</td>
</tr>
<tr>
<td style="width: 42.76%;"> </td>
<td style="width: 19.7%;"> </td>
<td style="width: 17.84%;"> </td>
<td style="width: 19.7%;"> </td>
</tr>
<tr>
<td style="width: 42.76%;">Guidance - FY22</td>
<td style="width: 19.7%;">9,750</td>
<td style="width: 17.84%;">150</td>
<td style="width: 19.7%;">1.5%</td>
</tr>
<tr>
<td style="width: 42.76%;">Consensus - FY22</td>
<td style="width: 19.7%;">          9,114</td>
<td style="width: 17.84%;">            4.6</td>
<td style="width: 19.7%;">0.1%</td>
</tr>
<tr>
<td style="width: 42.76%;">Difference</td>
<td style="width: 19.7%;">7.0%</td>
<td style="width: 17.84%;">3183%</td>
<td style="width: 19.7%;">1.5% points</td>
</tr>
</tbody></table><div style="text-align: left;" class="content-caption">Source: Company disclosures, CapIQ</div>

Nissan reported 1QFY22 results on Wednesday generating revenue of ¥2,008bn (-21.1% QoQ, +71% YoY) and OP of ¥75.7bn (for an OPM of 3.8% compared to OPM of -13.5% and -0.9% respectively in 1QFY21 and 4QFY21). The improvement of Nissan’s profitability compared to its previous quarter was mainly due decreases in SG&amp;A expenses which were 12.8% of revenue compared to 15.1% and 21.9% respectively in 1QFY21 and 4QFY21. The reported revenue was 6.5% higher than consensus estimates while OP beat by ¥130bn, thanks in large part to the finance business.

In ¥bn
Revenue 
OP
OPM


Actual Results - 1QFY22
2,008
              76
3.8%


Consensus - 1QFY22
1,886
-            55
-2.9%


Surprise
6.5%
NM
6.7% points


 
 
 
 


Guidance - FY22
9,750
150
1.5%


Consensus - FY22
          9,114
            4.6
0.1%


Difference
7.0%
3183%
1.5% points

Source: Company disclosures, CapIQ

Nissan Motor – Dependant on Its Finance Business

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Renesas Electronics / Equity Capital Markets

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:<ul>
<li dir="ltr" aria-level="1">US$2.8bn bn in 2017 <a href="https://www.smartkarma.com/insights/renesas-electronics-placement-additional-thoughts-on-valuation-flotation-and-ownership" target="_blank" rel="noopener">Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership</a></li>
<li dir="ltr" aria-level="1">US$2.4bn in 2018 <a href="https://www.smartkarma.com/insights/renesas-placement-tighter-effective-discount-and-placement-overhangs-but-statistic-supports-a-bid" target="_blank" rel="noopener">Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid</a></li>
</ul>In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:
US$2.8bn bn in 2017 Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership
US$2.4bn in 2018 Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid
In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

Nissan reported relatively weak 4Q results and disappointing guidance for FY03/22 after including an unusual “business risks” buffer in its OP guidance. The market reacted in slightly kneejerk fashion sending the stock down 10% on Wednesday but we consider this excessive given clear signs of excessive conservatism.

Nissan reported relatively weak 4Q results and disappointing guidance for FY03/22 after including an unusual “business risks” buffer in its OP guidance. The market reacted in slightly kneejerk fashion sending the stock down 10% on Wednesday but we consider this excessive given clear signs of excessive conservatism.

Alpha-Centric ESG Research

Kyle Rudden

I often note that whilst Asia arrived at the ESG party fashionably late, it is making up for lost time, going from idle to full-throttle often by leapfrogging large patches of middle ground. One apropos example is the recent surge in Chief Sustainability Officer (CSO) hires by Asian companies.Rather than going a typical route – like having someone in Marketing do double-duty for a year or so to delay shelling out big bucks for a proper CSO – companies such as <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">Singapore Exchange (SGX SP)</a> and  <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (0005 HK)</a> have recruited some seriously-qualified, executive-level CSOs.Big news, but I wouldn't have bothered with it a few years ago.Until recently, there wasn't much "Chief" or "Officer" to the CSO role. At best, companies hadn't yet figured out what to do with a CSO. At worst, they handed out CSO titles for optics; "greenwashing," as it were. CSOs were idealistic and motivated. Managements and Boards just didn't get it, yet.CSOs have since been excepted as equals into the "C-Suite," having proven their worth and earning a voice in all levels of strategic discourse. Exceptions do exist, the CSO role is varied and continues to evolve, and that "greenwashing" daemon still rears its ugly head every now and again.On the whole, however, CSOs are more influential than ever.From an ESG investing angle, the existence of a CSO has two specific implications: 1) it serves as a barometer of overall ESG commitment, and 2) it is associated with ESG outperformance, and lower ESG risk. For some issuers, it can even portend (portend, not predict) future ESG performance.Recent CSO activity in Asia inspired me to dig deeper. "Deeper" is relative, as the CSO pool in Asia (and elsewhere for that matter) is still very shallow. Nevertheless, this is a comprehensive analysis of the evolving CSO role in Asia – generally, and by cross-sections and topics such as:<ul>
<li>
Results: Correlative or causal, CSOs are linked to better ESG performance and lower risk.</li>
<li>
Country: Singapore and the Philippines have the most CSOs by company-count and size.  </li>
<li>
Sectors: Asian-company CSOs tend to concentrate in large-cap sectors and/or industries.</li>
<li>
Education: CSOs have more advanced degrees, from top universities, than do non-CSOs.</li>
<li>
Gender: Singapore and Thailand have the most female CSOs; Japan and India the least.</li>
</ul>

I often note that whilst Asia arrived at the ESG party fashionably late, it is making up for lost time, going from idle to full-throttle often by leapfrogging large patches of middle ground. One apropos example is the recent surge in Chief Sustainability Officer (CSO) hires by Asian companies.Rather than going a typical route – like having someone in Marketing do double-duty for a year or so to delay shelling out big bucks for a proper CSO – companies such as Singapore Exchange (SGX SP) and  HSBC Holdings (0005 HK) have recruited some seriously-qualified, executive-level CSOs.Big news, but I wouldn't have bothered with it a few years ago.Until recently, there wasn't much "Chief" or "Officer" to the CSO role. At best, companies hadn't yet figured out what to do with a CSO. At worst, they handed out CSO titles for optics; "greenwashing," as it were. CSOs were idealistic and motivated. Managements and Boards just didn't get it, yet.CSOs have since been excepted as equals into the "C-Suite," having proven their worth and earning a voice in all levels of strategic discourse. Exceptions do exist, the CSO role is varied and continues to evolve, and that "greenwashing" daemon still rears its ugly head every now and again.On the whole, however, CSOs are more influential than ever.From an ESG investing angle, the existence of a CSO has two specific implications: 1) it serves as a barometer of overall ESG commitment, and 2) it is associated with ESG outperformance, and lower ESG risk. For some issuers, it can even portend (portend, not predict) future ESG performance.Recent CSO activity in Asia inspired me to dig deeper. "Deeper" is relative, as the CSO pool in Asia (and elsewhere for that matter) is still very shallow. Nevertheless, this is a comprehensive analysis of the evolving CSO role in Asia – generally, and by cross-sections and topics such as:

Results: Correlative or causal, CSOs are linked to better ESG performance and lower risk.

Country: Singapore and the Philippines have the most CSOs by company-count and size.  

Sectors: Asian-company CSOs tend to concentrate in large-cap sectors and/or industries.

Education: CSOs have more advanced degrees, from top universities, than do non-CSOs.

Gender: Singapore and Thailand have the most female CSOs; Japan and India the least.


The Rise of the Chief Sustainability Officer in Asia

Japan

NISSAN MOTOR CO., LTD. manufactures and distributes automobiles and related parts. It also provides financing services. Nissan delivers a comprehensive range of products under various brands. The Company manufactures in Japan, the United States, Mexico, the United Kingdom and many other countries.

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Nissan Motor (7201 JP)

Nissan– Dragged Along by the Finance Business

Nissan posted better than expected results for the second consecutive quarter but once again it was the Finance business doing the heavy lifting...

Mio Kato

Nissan Motor – Dependant on Its Finance Business

Nissan reported strong results boosted by its finance business and a significant curtailment in SG&A expense putting it on track to hit our ¥250bn...

Mio Kato

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares. The current deal would be of somewhat...

Sumeet Singh

Nissan – Oversold

Nissan appears oversold after the stock fell 10% due to weak guidance by the company, however, this appears to be simple conservatism following a...

Mio Kato

The Rise of the Chief Sustainability Officer in Asia

Chief Sustainability Officers can impact ESG performance and risk-adjusted returns. CSOs are becoming more common anong Asian companies, which are...

Kyle Rudden

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